Stocks, bonds, and stock, bond, and money market mutual funds are popular investment options. These are generally classified into various asset classes and indexes. Examples of asset classes and indexes are the S&P 500, Dow Jones Industrial, Nasdaq Composite, and indexes composed of small, mid, and large cap, global and various types of bond assets. Institutional investors such as those managing 401(k) portfolios often allocate portfolio assets among selected indexes and classes of stocks and bonds, most commonly stock, bond, and money market mutual funds, to enhance investment yields and reduce investment risks.
The invention advantageously provides a system that is useful for comparing the performance of various investment options to provide a mathematical basis for allocating resources among the available investment options.
In a preferred embodiment, the invention relates to methods and computer programs for ranking and allocating investment assets. The assets are classified into discrete asset classes and index values are obtained for each of the asset classes. A performance value is determined for each of the asset classes based on the index values for a starting time period and at least three subsequent time periods for each asset class. In a particularly preferred embodiment, the performance values are calculated based on the 5 and 12 week index value totals for an asset class in conjunction with the index value for the 14th week.
The performance value of each asset class are then compared to one another and the asset classes are ranked based on their performance values. The investment assets may then be allocated among the asset classes based on the ranking of the asset classes. In a preferred embodiment, 5% of the assets are maintained in a Money Market Fund, and the remaining 95% of the assets are allocated so that the number 1 ranked asset class receives 30%, the second ranked asset class receives 25%, the third ranked asset class receives 20%, the fourth ranked asset class receives 15%, and the fifth ranked asset class receives 5% of the investment assets. The ranking and/or the allocation may preferably be modified for special conditions, such as in conditions corresponding to overbought or oversold conditions. The allocations are preferably re-evaluated on a periodic basis, most preferably about every six weeks.